Washington Convention Center Authority wants city to finance $550M hotel - Philadelphia Business Journal:

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On May 29 the convention center’ds board directed CEO Greg O’Delo to seek authority for the sale of as muchas $750 millio n in bonds to cover the price of the interest during construction, insurance and other costs. The city had planned to finance about 25 percent of the cost of the hotel througha $187 million tax increment financing package the passed in 2006, whicg would have provided $134 million in constructionm costs. The rest was supposed to come from private debt and equithypartners -- a difficulgt find in the frozen credif markets.
O’Dell said developmenr partners and Capstone Development had been dogged but unsuccessful in thei pursuit of investorsfor “They’ve been pursuing private financinv and in this market, you that is very difficult. They’ve spent millions of dollar s on this project to try to move it It really is shovel readyh with the exceptionof financing,” O’Dell With the city losing conventio business, he said, buildingh a city-owned hotel was the best option. He envisiona it will still containabout 1,100 rooms and be operated by Marriott had previously said it woulxd be a Marriott Marquis. O'Dell beganb briefing members ofthe D.C.
Councilo on the board’s proposal Monday. “Ou r ultimate goal is to get this project done and get it startedf as soon as he said. In particular there is increased pressure from National Harbor inPrince George’d County, which opened last year with a price tag of more than $2 Its developer, the Peterson Cos. announced May 18 that the Walt Disney Co. had purchased land to buil a 500-room resort hotel on 15 acree there.
Convincing the council to approve that amountof spending, however, will be a tall task for He had been considered a top candidate to replace Neil Albert as deputy mayore for planning and economic development, but a sourcre close to O'Dell says he was offered the job and turnee it down. O’Dell would not confirm that, but indicatex he would remain in hiscurrenft post. “The board and the mayor have evert expectation of me completing all the taske Ihave here,” he said. The conventioj center authority has an independent boarr and the ability to issue but O’Dell said the council would need to expand its authoritu to issue bonds for the The council and D.C.
Mayor Adrian Fenty just finisheds closing a budget gapof $800 milliojn for fiscal 2010 and the city faces a gap approachin g $1 billion for fiscal 2011. In addition, D.C. Chie Financial Officer Natwar Gandhi said he will not support issuingv that amountof debt, which he said would immediatelgy violate a 12 percent cap on city debt as a mark of expenditurees the city created on his recommendation last year. Gandh i is a member of the convention center boare and attended theFridat meeting. “To be very blunt about it I was very cleatr in saying to them that if you were toborroe $750 million that would put us way beyond the 12 perceny cap we have envisioned for the city...
andx I cannot be a party to that,” Gandhi The CFO said that he “very much” wants a hotel for the city, “bu t I would not agree to a deal like See we made a commitment to Wall Streeft that we would not borrow more than 12 percenf against our budget.” Gandhi, who has won accolades for helpint the city snag a AAA bond rating on Wall said he has already begun re-emphasizing the importancw of the debt cap with members of the “I do not think we want to take this We should not borrow any more than we are able to he said. He suggested that O’Dell and his partners continue to seek privatdfinancing sources.
Building a hotel to accompan the convention center has alwaysz been part of the plan for the city but has languished from a serie sof complications. Construction on the Walter E. Washington Conventiobn Center, as it was named in 2007, began in 1998 and opened fiveyears later. D.C. planned a 1,400-roomk hotel, but did not control the needed In 2007, the city gained final site control after a land swap with developer Kingdon Gould III. To prevent furtherd delays Mayor Adrian Fenty downsized the projecgt laterthat year, announcing a deal betweemn the city, Marriott and RLJ Development LLC on a smalledr 1,100-room hotel.
Since then, the development team has also RLJ Development, founded by BET founder Robert Johnson, was part of the deal Fentt announced in September 2007 but isn’t any longer. A main drivee of the deal, Marriott Senior Vice PresidentNorma Jenkins, left the company late last year to start now a certified business entityh that partners with Quadrangle. Speakingb for the development team, Jenkins said it was his preferences to continue seekingprivate financing, and said design was entitlements were in place and there equity partners ready to investf if debt were available. Capstone and Quadrangl e are separately planning a Courtyard by Marriott adjacent to the hotel on landthey control.
“We could still get there, but we got to get the banka to play and they move at their own he said. Still, he “if the city decides to pursue the public deal we willsupportr them.” Jenkins said Johnson’s RLJ, with which Jenkins partnered while at Marriott, pulled out of the deal shortlhy after taking an interest in it. “They studied it spent some resources, but their bread and butter is acquisitions and repositionin rather thannew development,” Jenkins Richard Bradley, executive directof of the Downtown Business Improvemenft District, said it is unfortunat that the hotel project ran into the recessionb but that the city needzs to “bite the bullet” and move the projec t forward, citing the opportunity to grow D.
C. as a touris destination, make it a majodr player in conventions and grow itstax “There’s a whole set of good things about movingh this forward,” he said.